Ashland slashes dividends by 20 US cents

20 November 2008 16:18  [Source: ICIS news]

TORONTO (ICIS news)--Ashland is cutting quarterly dividends to 7.5 US cents - from 27.5 cents - to ensure it has enough cash available amid deteriorating and uncertain markets, the US specialty chemicals producer and distributor said on Thursday.

 

With the cut, Ashland would be able to retain an additional $60m (€47m) a year that would otherwise go to shareholders, CEO James O’Brien told analysts in a conference call.

 

“As we look at the macroeconomic environment, we want to be very proactive about maintaining our financial flexibility,” said O’Brien.

 

Ashland was taking a more defensive posture to have as much cash available as possible to be prepared should “things get even worse than we believe is possible,” said O’Brien.

 

Customers were holding back purchases in anticipation of a serious decline in raw material costs, O’Brien said in commenting on the current state of US chemical markets.

 

“What we find in our distribution business is that nobody is buying to stock,” he said.

 

Customers were looking for shorter lead times and smaller orders as they were buying only for production, he said.

 

With the dividend cut, Ashland’s dividends were now at the low end of the specialty chemicals sectors, he said.

 

In addition to the dividend measure, Ashland was also looking at generating more cash through cost reductions, lower capital expenditures, speeding up estimated synergies of $120m from its $2.6bn acquisition of Hercules, as well as staff reductions, O’Brien said.

 

A key priority was paying down debt, he said.

 

Last week, credit agency Moody’s cut its ratings for Ashland due to weak third-quarter earnings and a $750m bridge loan to finance the Hercules acquisition.

 

O’Brien, responding to analysts’ questions, said that Ashland’s corporate expenses were too high relative to its peers' and added that cost reductions would affect both Ashland and Hercules. 

 

But he defended the company’s corporate jet as a useful tool and not a luxury.

 

One analyst brought up the jet and questioned whether everybody, including senior management, was tightening their belts.

 

On Wednesday, the top executives of the Big Three Detroit carmakers caused a big controversy when they flew to Washington on their corporate jets to plead for government help to bail them out.

 

In related news, Ashland said its board elected William Heitman as controller effective 1 December.

 

Heitman, previously controller at Goodyear, replaces Lamar Chamber, who will continue as chief financial officer.

 

Ashland's shares were down 9.3% to $12.98 in Thursday morning trading on the New York Stock Exchange.

 

($1 = €0.79)

 

For more on Ashland visit ICIS company intelligence

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By: Stefan Baumgarten
+1 713 525 2653

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